Few opposed Argentina’s military dictatorship as effectively as the Mothers of the Plaza de Mayo, with their lonely, dignified vigils in Buenos Aires’ main square for their children “disappeared” by the junta. But now the group, whose moral authority in the country was previously akin to that of Nelson Mandela or the Dalai Lama, has become embroiled in a huge corruption scandal that threatens to tarnish its reputation and put an end to the Mothers’ political activism for good.

More than 60 people are facing charges, including the daughter of the Mothers’ main driving force, Hebe de Bonafini, in connection with alleged fraud and kickbacks over multi-million pound government contracts to build social housing for the country’s poor. The scandal has also laid bare the group’s cozy relationship with the populist left-wing government of Cristina Kirchner.

At the centre of the storm is one of Argentina’s most controversial characters, Sergio Schoklender, the group’s former financial administrator. Despite a lifetime of high-profile left-wing activism, Schoklender, 53, remains best known in his homeland for his involvement in a double murder that rocked Argentina and generated front page headlines for months.

In the early hours of 30 May, 1981, Schoklender and his younger brother Pablo bludgeoned their parents, Mauricio and Cristina, to death, before going on the run. They were eventually arrested and convicted of murder after the court rejected their claims of severe parental abuse. Their father’s status as a wealthy arms dealer and one of Argentina’s most successful businessmen ensured that the trial took place amid a blaze of publicity.

Sergio Schoklender spent 14 years behind bars, becoming politically radicalised and qualifying as both a lawyer and a psychologist. He also launched a campaign for university education for prisoners and supervised an official census of Argentina’s prison population.

During that time, he met Ms de Bonafini, now 83, and the two political activists soon formed a deep bond. On his release in 1995, Schoklender initially stayed in Ms de Bonafini’s house. “She is like a mother to me,” he once said. “She cooks for me, she tells me off if I don’t eat, or if I am dishevelled or don’t look after myself.” Ms de Bonafini also spoke of Schoklender in the most glowing terms. “I began to love him like a son,” she said.

But now that mutual appreciation society has turned into an extremely public falling out, as Schoklender, Ms de Bonafini’s daughter Alejandra and 65 others are the subjects of a massive criminal investigation.

The probe focuses on the alleged misuse of 765 million pesos (£112m) of taxpayers’ money handed to the Mothers of the Plaza de Mayo under a government contract to build social housing, in a scheme launched in 2008 and known as Shared Dreams.

According to prosecutors, roughly £7.5m ended up in Schoklender’s personal accounts and was used to buy, among other things, two private planes, a yacht and a fleet of luxury cars. The list of charges faced by Schoklender and the other accused includes money laundering, fraud, falsifying documents and conspiracy. “Sergio Schoklender is a traitor and a thief,” Hebe de Bonafini said recently, laying bare the discord.

But true to form, Schoklender is refusing to go down without a fight. Claiming he is being made a scapegoat, he has threatened to reveal details of widespread corruption within the ruling Peronist party of Ms Kirchner and her late husband Nestor, who preceded her as president from 2003 to 2007.

He denies any wrongdoing, and insists that the housing built under Shared Dreams was both cheaper and of a better quality than that of rival contractors. But he also claims that it was impossible to implement state contracts without becoming involved in the corruption that plagues Argentina’s national bureaucracy and which, he says, has worsened during the Kirchners’ time in power. Specifically, he has claimed that it is routine for public works contracts to be awarded without a competitive tender process and that kickbacks of between 15 and 25 per cent are widely demanded.

Above all, Schoklender has pointed the finger at Nestor Kirchner, who died of a heart attack in 2010, for allegedly building a far-reaching web of patronage that has since helped maintain his wife in power. Cristina Kirchner, who was first elected president in 2007 and then re-elected last year by a landslide, he has cast as an ingenue, possibly out of her depth in supervising Argentina’s unwieldy bureaucracy and the Peronists’ tight-knit web of local party bosses.

Despite the obvious self-interest in Schoklender’s claims, they are being taking seriously in Argentina, possibly because they appear to resonate with the reputation for cronyism attached to Mr Kirchner’s rule.

There have also been questions about why the authorities did not act against the alleged fraud – committed within an organisation that has grown into a key ally of the Peronists – much earlier. Teodoro Cervo, writing in the newspaper Clarin, said: “Not just did governors, ministers, secretaries and bosses of all kinds listen to Sergio Schoklender, but they also applauded him and congratulated him whenever the opportunity arose.”

In the years since Nestor Kirchner was elected president in 2003, the first couple’s personal wealth rocketed more than fivefold, thanks largely to a series of highly successful property deals in their home region of Patagonia.

Meanwhile, the government has engaged in a series of populist moves that have called into question its democratic credentials, including high-profile battles with Clarin.

In the end, no matter how the criminal trials play out, the Mothers of the Plaza de Mayo have already been badly tarnished by the mushrooming scandal. Many ask why a group originally set up to campaign for justice for victims of the so-called “dirty war” carried out by the military dictatorship should now be involved in social housing projects and other poverty alleviation schemes.

Ms de Bonafini has justified the group’s expanded role by saying that it is a natural extension of the left-wing convictions of the slain children of its members, many of whom were trade unionists or socialist or communist activists.

Yet her critics also cite her angry refusal to respond in detail to questions about the scale of the fraud, or how she could have failed to be aware of it. “What are they going to accuse us of, of having given the blood of our children for this wonderful country?” she recently replied when questioned about the scandal.

But Ms de Bonafini, who is not herself under suspicion of criminal misconduct, has been told by the state prosecutor, Jorge di Lello, that she “should respond” and explain why and how she allowed Schoklender to play such a key role in the group.

Now, with criminal trials looming, Argentines are bracing themselves for yet more revelations about how one of the country’s most respected institutions, run by mothers whose sons and daughters made the ultimate sacrifice for Argentine democracy, managed to so badly lose its way.

Mothers’ defiance: A brief history

The Mothers of the Plaza de Mayo was launched on 30 April 1977 by 14 mothers seeking justice for their children abducted by the ferocious right-wing military dictatorship that governed Argentina from 1976 to 1983.

Wearing embroidered white headscarves, their vigils every Thursday in front of the presidential residence, the Casa Rosada, in Buenos Aires constituted a rare act of public defiance against the junta, which had terrified most Argentines into silence by “disappearing” thousands of dissidents – Human Rights Watch puts the figure at 15,000 – often dumping the bodies from helicopters high over the Atlantic.

The generals appeared unsure of how to handle the Mothers, wary of the international outcry that might have followed a brutal crackdown on the group. Nevertheless, three of the Mothers’ 14 founders ended up being “disappeared” themselves.

The Mothers spawned a second group, the Grandmothers of the Plaza de Mayo, made up of the mothers of young mothers or pregnant women abducted by the junta, who sought to trace their missing grandchildren. It is thought that the dictatorship put about 500 such babies up for illegal adoption by childless military or police officers and other supporters of the regime.